Just random musings about the current state. The housing market appears to be kinda in limbo right now, holding it's collective breath waiting for the next election and what shape the inevitable speculator bailout comes in.
There are some buyers, but mainly these are people thinking they are getting a good deal based on the prices at the height of the bubble, and the irrational belief that prices will regain their inflated values sooner rather than later. These are mostly speculators, and in most cases will probably constitute an eventual additional wave of foreclosures and defaults. They are hedging that the bailout will come before they are insolvent, and the taxpayers will buy their homes for them.
There are lots of people trying to sell, but REO inventories are still accumulating. This is partially due to increasing NOD/foreclosures, but also due to banks insisting on dishonest and deceptive pricing and sales practices, as they try to fool buyers into thinking they are getting deals while still selling over market. They are finding some fools, but just like in the bubble formation, chasing short-term profits will likely be worse for them in the long term, as people lose faith in their pricing, and eventually stop buying all together due to suspicion. At that point, the banks hope the bailout will have come, otherwise there's likely to be a massive fire sale as they all implode under the weight of the inventories they can't unload because they were too greedy, dishonest, and despicable (and people will cheer as they do so).
Meanwhile, prices climb slowly downward in some middle ground approximation between the irrational optimist pricing and the real market value. Above market sales where people think they are getting a good deal because the price is below comps will slowly push prices down, even as inventory accumulates, both realized and unrealized (eg: people who are delinquent and underwater but not foreclosed on yet, due to the bank not wanting to show as much inventory in their books). As more people get pushed underwater, the unrealized pending inventory will continue to build, as lenders hope they can manipulate their books long enough to see the bailout socialize their losses from irresponsible lending.
Best thing that could happen for the market? A good, solid, credible, non-revocable promise of no bailout, ever. Force everyone to act as if they need to cut their losses, because there's no multi-billion dollar taxpayer handout coming. Force the market to react like there's not going to be the massive government manipulation everyone expects, and is holding their breath (and housing affordability) hostage for. Until then, we will all wait, and see how stupid our government will be.